Argentina central bank aids peso; bonds fall again

Redacción de Reuters

4 MIN. DE LECTURA

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BUENOS AIRES, Oct 29 (Reuters) - Argentina’s peso closed steady on Wednesday due to a massive central bank dollar sale, but bonds fell for an 11th consecutive session due to continued concerns over a government plan to take over private pensions.

Stocks got a boost, though, as local private pension funds sold Brazil-listed shares of Petrobras energy firm (PETR4.SA) to buy Buenos Aires-listed shares of the same company (APBR.BA) to comply with government orders to sell their foreign assets.

Traders said the central bank sold about $400 million in dollars on the foreign exchange market after offering to sell as much as $1 billion when the peso opened weaker, extending a slide to six-year lows. But an official source, who asked not to be named, said the amount sold was $165 million.

“The dollar offer managed to turn around the rise in the dollar price, although almost without trades because just the idea that the Central (Bank) is willing to to do anything changed the mood of the market,” said a trader, who asked not to be named.

In formal trade between banks the peso ended flat at 3.3675/3.3700 per dollar ARS=RASL, after weakening to 3.41 in early trade.

Businesses and individuals are continuing to demand dollars, which are seen as a safe haven in Argentina, where markets have been tremendously volatile this month.

The peso has remained under pressure due to investor concern over a government bid to take over private pension funds and more general jitters over the Argentine economy. The government has asked the funds to stop selling pesos and sovereign debt.

In informal trade between foreign exchange houses, as measured by Reuters, the peso closed down 0.58 percent at 3.4600/3.4700 ARSB=.

In credit markets on Wednesday, sovereign bond prices traded locally closed down an average 3.5 percent, in an 11th consecutive session of losses, accumulating a 65 percent loss in October.

The market is pricing in a high probability of default into Argentine bonds because of perceptions that the government wants to take over pension funds in a desperate move to find money to service debt next year.

The Bonar 2017 denominated in dollars ARBONAR17D=RASL slumped more than 10 percent to close at 22.5 asking price.

The benchmark MerVal stocks index .MERV seesawed during the session and closed up 2.61 percent at 918.45. Of active issues 46 advanced, 19 declined and 10 were unchanged.

Volume was very high at $67 million, with more than half of it due to pension funds buying local Petrobras shares, which rose 9 percent to 42 pesos per share, traders said. Petrobras is weighted as 11.87 percent of the MerVal.

Congress is debating the president’s pension nationalization bill.

The head of the state pension program, Amado Boudou, tried to calm markets on Wednesday, repeating assurances that the government will not liquidate private pension funds if it takes them over.

The Pension and Retirement Fund Administrators, known as AFJP, are major players in the local market, and bonds and stocks prices lost a quarter of their value last week as investors fled, fearing liquidity will dry up without the funds.

“The AFJP loan 60 percent of their funds to the government. With new contributions we are going to lower that amount,” Boudou said. (Reporting by Walter Bianchi; Writing by Fiona Ortiz;)